The sustainability of SMEs is a complex issue which is thought to be affected by a multitude of things. The aggregate effect of SMEs as the driving force of modern economies makes them liable to scrutiny since they appear to be responsible for the success and failure ot particular economies. What is yet to be known is under what set of conditions an ecosystem of SMEs is sustainable.
SMEs generally thrive when they are part of a supply chain with assured market. Also they will be affected by the existing infrastructure and availability of finance. If these are met they serve better the nation in terms of employment and wealth generation for larger community.
It was found in US that “Exporting services SMEs, which represent a very small share of all U.S. services SMEs, are more export-intensive than large services exporters. U.S. services SME multinational companies, which are even less common, are nearly three times more export-intensive than large U.S. multinationals. On the other hand, trade barriers, including both tariffs and nontariff measures, disproportionately affect SMEs relative to large firms, as do many business impediments, such as high transportation costs.”
http://unstats.un.org/unsd/trade/s_geneva2011/refdocs/cds/usa%20-%20itc%20-%20small%20and%20medium%20sized%20enterprises%20(nov%202010).pdf
Dear Mohamed, SMEs may need to overcome key challenges.The following conditions may enable sustainable value creation of SMEs consisting of access to global market, adequate infrastructure, access to modern technology, have skilled labour for either manufacturing, services and marketing, access to low cost credit, good management in terms of storage, designing, packaging, product development and display, etc.
SMEs generally thrive when they are part of a supply chain with assured market. Also they will be affected by the existing infrastructure and availability of finance. If these are met they serve better the nation in terms of employment and wealth generation for larger community.
It was found in US that “Exporting services SMEs, which represent a very small share of all U.S. services SMEs, are more export-intensive than large services exporters. U.S. services SME multinational companies, which are even less common, are nearly three times more export-intensive than large U.S. multinationals. On the other hand, trade barriers, including both tariffs and nontariff measures, disproportionately affect SMEs relative to large firms, as do many business impediments, such as high transportation costs.”
http://unstats.un.org/unsd/trade/s_geneva2011/refdocs/cds/usa%20-%20itc%20-%20small%20and%20medium%20sized%20enterprises%20(nov%202010).pdf
@Mohamed, due to the last sentence of explanation of your thread regarding ECOSYSTEM, I have good paper downloaded for this thread!
SME in my country still strugle with upgrading of capital and expanding market for some while other still fight on high cost of transportation and license from government, since corruption and complex procedure to arrange license and tax is still hard to reduce.
Sustainability will go with an easy procedure in loan to expand their capital,minimalization of transportation cost due to bad infrastructure corruption and easy policy or beaurucacy when dealing with license and tax from government in a country.
SME's may thrive under the conditions of access to global market, access to modern technology, skilled labour and a good managment team.
The sustainability of SMEs as value creation entities is linked to clusters evolution. Much of the research on clusters refers to this evolution as a central feature of regional development (for example SME's of clusters in France, in Italy and in England). In my research work you have a beautiful example of SMEs of French perfume cluster.
In attachment you have a Case Study in the French Perfume Cluster
Hope you can find something useful.
Take care
Article Historical Trajectory and Knowledge Embeddedness: A Case Stu...
You have a very good paper of Carnevali, F. 2003. Malefactors and honorable men. The making of commercial honesty in 19th century Birmingham, in J. Wilson, A. Popp (eds.), Industrial clusters and regional business networks in England, 1750-1970, (Ashgate):192-207.
2. The sustainability of SMEs as value creation entities is linked to the STRATEGIC SCANNING ability of SMEs. For example, because of usefulness of “in the field” information for SMEs looking for new outlets product/market.
Article Strategic scanning: usefulness of « in-the-field" informatio...
One important factor is related to maintaining the high level of innovation. The presence of the entrepreneur or the director is vital. He or she are supposed to be very close to the teams that have the expertise of the business. This presence is an important role to SME's creativity and innovation. In other words, a small business following this way has a competitive advantage over large companies - who are at risk of being lost or crushed under the weight of bureaucracy. So there were many large companies holding technology for the creation of the PC. However, was the tiny Apple to make this paradigm shift. The same happened in many other sectors of the economy.
Could I suggest that the human capital of the entrepreneur or entrepreneurial (ownership) team is the single most critical determinant of sustainable growth. All other things follow such as quality of networks, access to finance , strategic orientation etc. many of the answers you have received confuse causality and are related to the particular interests of the respondent . My personal view is that SMEs individually do very little on average, but in their totality are a major economic force.
I'd agree with Marc that the entrepreneur or entrepreneurial team are the key factor in shaping the performance of SMEs; this is particularly important in smaller firms and in situations where other drivers (e.g. supply chain pressures) play a less important role. It's also worth unpacking the concept of 'human capital'. For example, while there is plenty of evidence on the role of educational level, technical knowledge etc., there's also a research tradition that has highlighted the importance of the owners' and managers' subjective perceptions of entrepreneurial opportunity. While this does reflect a personal interest, I'd strongly recommend reading the original (1959) study by Edith Penrose, The Theory of the Growth of the Firm, and subsequent critiques, elaborations (and the occasional reinvention of the wheel!) in the economics, strategy and entrepreneurship literatures. Other commentators have mentioned the importance of networks, strategy and innovation - the real beauty of the Penrosean tradition is that it requires you to explore the complex inter-relationship between these different elements, which necessarily span multiple levels of analysis.
European Union has an interesting communication on these issues
http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52001DC0366&from=ES
The sustainability of SMEs as value creation entities depends, among other things, on their market knowledge competence. These entities should develop strategies that enable them generate market intelligence pertaining to market conditions and trends, current and future customer needs, and competitors' strategies and capabilities. Market knowledge activities (market scanning, market information gathering and dissemination, digestion and utilization) are widely articulated, in both small and large scale entities, as critical to offer innovative and superior value products or deliver services. Consequently, entities that offer superior value products/services achieve competitive advantage and superior business performance. It is worthy reading the papers of Day (1994), Li and Calantone (1998), and Moore and Manring (2009). I hope it helps.
Mohamed,
These papers may help and offer some insight
https://www.researchgate.net/publication/299747565_Towards_a_talent-driven_outward-oriented_globally-competitive_SME_framework_Discussion_Paper
https://www.researchgate.net/publication/305687139_Priority_policy_recommendations_for_transforming_individual_productivity_and_SME_competitiveness_in_Jamaica
Technical Report Towards a talent-driven outward-oriented globally-competitiv...
Technical Report Priority policy recommendations for transforming individual ...
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